EUR/JPY: BOJ's additional easing fails to inspire Yen selling
- EUR/JPY remains under pressure even as BOJ announces additional easing.
- BOJ commits to unlimited QE but retains the yield curve control target.
- Oil remains in the red on persistent oversupply concerns.
The Bank of Japan (BOJ) announced additional easing to contain the economic fallout from the coronavirus outbreak soon before press time. So far, however, that has failed to weaken the bid tone around the Japanese yen.
EUR/JPY has barely moved in response to the BOJ news and continues to trade in the red near 116.20.
As expected, the central bank maintained the policy balance rate at 0.1%, retained the 10-year Japanese government bond (JGB) yield target of 0%, and announced an open-ended asset purchase program. "The bank will purchase the necessary amount of JGBs with no limit," the statement said. The central bank also cut the gross domestic product forecast for 2020 to -5.0 to -3.0%.
Even so, the yen bears are not impressed and remain on the sidelines, possibly due to the weakness in oil prices. The West Texas Intermediate is down over 5% at press time on oversupply concerns. While the futures on the S&P 500 are flashing green, analysts at Goldman Sachs have warned that the market breadth is narrow and could end up reversing the recovery rally see over the past few weeks.
Looking ahead, the EUR/JPY could continue to track the action in the oil markets. Some analysts expect the EUR/USD to draw bids on account of the recent tightening of the USD-bund yield spread, which had widened by roughly 100 basis points earlier this year. The strength in EUR/USD, if any, could offer support to the EUR/JPY cross.